On July 21st, the back month contract of Dec 15 was trading at a .65 discount to spot.
Fast forward 7 months (and 2 more cartel silver smashes) later. and silver remains in continual, unending backwardation.
Silver currently first enters backwardation with the July 14 contract, with the back month (now Dec 16) still trading at an almost identical 0.60 discount to spot (February 2012).
After being smashed from $44 to $26, and clawing its way nearly back to $35, back-month backwardation in silver is nearly unchanged!
Throw the price volatility and the 30 million ounce increase in reported COMEX silver inventories out the window- backwardation in silver continues to tell the story of EXTREME PHYSICAL TIGHTNESS, AND RISK OF COMEX DEFAULT/ IRRELEVANCE!
|Daily Settlements for Silver Futures (PRELIMINARY)Trade Date: 02/07/2012|
|Prior Day |
For readers new to the silver market, contango is a normal market condition, where a commodity's contracts typically are more expensive further out into the future, as the holder of the asset must account for storage fees, insurance, etc. When a market is trading in backwardation, this means that future contracts are selling at a discount to the spot month, and indicates that there is either a distrust of the currency the commodity is priced in, (the US dollar in this case) or else there is a concern that the commodity will not be available when the contract comes due (exchange default concerns, etc).